By Lauren Thomas and Collin Eaton

Activist Elliott Investment Management on Tuesday disclosed a stake in Phillips 66 valued at more than $2.5 billion and said it is pushing the oil refiner to consider operational changes to boost its stagnant stock.

Elliott is seeking to streamline Phillips 66, most notably with the sale or spinoff of its big midstream business, as The Wall Street Journal previously reported. The Houston-based company's midstream business makes money transporting energy, and is usually more immune to commodity-price fluctuations than the refining or production sides of the oil business.

Elliott had first pushed Phillips 66 for strategic improvements in late 2023 after disclosing a roughly $1 billion investment in the company.

A few months later, Phillips 66 and Elliott came to an agreement on a new board member and said they would work together to name a second director in the coming months. That second director with Elliott's blessing has yet to be named.

Elliott said it believes Phillips 66 hasn't fulfilled its commitment to further board changes. The firm's latest position makes Elliott one of Phillips 66's top five investors.

In a statement, Phillips 66 said that its 2024 results reflect its success in achieving its strategic commitments and that its targets for the coming years are designed to drive greater long-term shareholder value. It said it welcomes constructive dialogue with all of its shareholders.

Elliott has had a busy run in recent months of shaking up companies and ousting chief executives in some cases. Its targets have included Starbucks, Southwest Airlines, Tinder parent Match Group and industrial conglomerate Honeywell. The latter just announced a breakup following Elliott's arrival.

Elliott has a record of successful investments across the energy sector, including at Suncor Energy and Hess. It recently built a stake in struggling British oil major BP.

Shares of Phillips 66 had run up through the spring of last year, trading above $170 apiece, but have since fallen. The oil refiner has a market value of around $50 billion. Its stock closed Monday at $123.71.

Back in 2023, Elliott argued Phillips 66 was underperforming peers including Valero Energy, and that the company could follow a similar path to Marathon Petroleum, which sold its Speedway gas-station chain in 2019. Elliott also wanted the company to focus more on its main refining business and cut operating costs.

Phillips 66 was born in a spinoff from ConocoPhillips in 2012. The company runs refineries in California, Louisiana, Texas and has chemical plants elsewhere. It also has a fast-growing pipeline and terminals business.

In the shale boom of the past decade, Phillips 66 and others spent billions to build and acquire thousands of miles of pipelines, ferrying oil, natural gas and fuel across the country.

A number of Wall Street analysts have noted that Phillips 66 trades at a discount relative to the sum of its parts, and have questioned whether the business can get credit for its higher-value midstream business.

Elliott said it believes the midstream business could command a premium valuation of more than $40 billion.

Phillips 66 in late January reported a sharp drop in its fourth-quarter profit. It said its earnings were hit by weaker refining margins and accelerated depreciation of its Los Angeles refinery, which it plans to close.

CEO Mark Lashier said at the time the company had set fresh financial and operating targets focused on cutting debt to $17 billion.

Write to Lauren Thomas at lauren.thomas@wsj.com and Collin Eaton at collin.eaton@wsj.com

(END) Dow Jones Newswires

February 11, 2025 09:27 ET (14:27 GMT)

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